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Managing Typhoon Risk in China

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Managing Typhoon Risk in China Title CONFIDENTIAL ©2014 AIR WORLDWIDE 1 Managing Typhoon Risk in China Ruilong Li, Ph.D. CONFIDENTIAL ©2014 AIR WORLDWIDE 2 Agenda - Overview of typhoon risk in China - Hazard module - Vulnerability module - Modeled losses CONFIDENTIAL ©2014 AIR WORLDWIDE 3 AIR Is Dedicated to Managing Typhoon Risk in China Launched Northwest Pacific Basinwide Typhoon Model, including an extensive Separate wind and flood update for China and the losses are available in addition of South Korea Touchstone 2007 2010 2013 2014 2015 Released the first Introduced an Index Value Typhoon model for for our Industry Exposure China in collaboration Database to accommodate with the Shanghai the rapid development of Typhoon Institute China’s economy CONFIDENTIAL ©2014 AIR WORLDWIDE 4 Overview of Typhoon Risk in China CONFIDENTIAL ©2014 AIR WORLDWIDE 5 The Northwest Pacific Basin Is the Most Active Basin for Tropical Cyclones Every year: • 30 form • 20 reach typhoon status • 5 reach super typhoon status CONFIDENTIAL ©2014 AIR WORLDWIDE 6 The Geography of Eastern China Is Complex • Coastline ~14,500 km • Coastal mountains Beijing – Goulou Mountains Yellow River – Wuyi Mountains – Xandang Mountains • Major rivers Shanghai – Yellow River ~6,000 km Wenzhou – Yangtze River ~ 5,500 km Yangtze River Fuzhou – Pearl River ~4,000 km • Coastal cities – Shanghai Guangzhou – Wenzhou Pearl River – Fuzhou – Guangzhou CONFIDENTIAL ©2014 AIR WORLDWIDE 7 Significant Losses from Typhoons Are Not Limited to Coastal Provinces Event Year Affected Provinces Econ Loss (CNY Affected Provinces Billions) 2004-2006 Rananim 2004 Zhejiang, Fujian, 22-30 Shanghai, Jiangsu, Anhui, Hubei, Jiangxi, Henan, Hunan Matsa 2005 Zhejiang, Shanghai, 16-24 Jiangsu, Shandong, Liaoning Liaoning, Hebei, Tianjin HebeiHebei Khanun 2005 Zhejiang, Shanghai, 13-17 Jiangsu ShandongShandong Longwang 2005 Fujian 7-11 Bilis 2006 Fujian,Hunan,Guang- 22-30 Henan Damrey dong,Jiangxi,Guangxi, JiangsuJiangsu Anhui Shanghai Hubei Zhejiang Chongqing Zhejiang Rananim Saomai 2006 Zhejiang, Fujian, 10-15 Hunan Jiangxi Saomai Jiangxi Guizhou Bilis Fujian Fitow Damrey 2012 Jiangsu, Zhejiang, 3-8 Shandong, Hebei, Guangxi Guandong Liaoning Usagi Usagi 2013 Zhejiang, Fujian, 20-30 Hainan Guangdong, Guangxi Fitow 2013 Zhejiang, Jiangsu, 60-65 Fujian, Anhui, Jiangxi CONFIDENTIAL ©2014 AIR WORLDWIDE 8 Hazard Module CONFIDENTIAL ©2014 AIR WORLDWIDE 9 To Better Understand Typhoon Complexity, AIR Collaborated with the Shanghai Typhoon Institute - Understanding unique factors are key to modeling typhoons in China • Inland extent of precipitation footprint • Interaction of typhoons with inland weather systems • Effect of coastal mountains on typhoon precipitation • Effect of South China Sea monsoons CONFIDENTIAL ©2014 AIR WORLDWIDE 10 Historical Storms Provide Genesis Points for Stochastic Storms • Genesis point chosen from historical data • Track built using statistical and probabilistic information based on historical information • Wind characteristics added, such as central pressure and radius of maximum winds • Precipitation characteristics added, such as maximum rate and rainfall radius CONFIDENTIAL ©2014 AIR WORLDWIDE 11 Validation of Spatial Distribution for Typhoon Tracks Is Important low high CONFIDENTIAL ©2014 AIR WORLDWIDE 12 The AIR Stochastic Catalog Reflects Observed Storm Frequencies for China Weak (Cat 0-2) 0.5 Modeled 0.4 observed 0.3 Shanghai 0.2 0.1 0 Zhejiang Hainan Guangdong Fujian Zhejiang Shanghai Strong (Cat 3-5) 0.05 Fujian Modeled 0.04 observed 0.03 Guangdong 0.02 Hainan 0.01 0 Hainan Guangdong Fujian Zhejiang Shanghai CONFIDENTIAL ©2014 AIR WORLDWIDE 13 China’s Coastal Mountains Cause Typhoon Winds to Diminish Quickly U.S. Gulf Coast China Coast Winds(mph) at 0, 6, 12 h Winds(mph) at 0, 6, 12 h CONFIDENTIAL ©2014 AIR WORLDWIDE 14 A Third Generation Unified Precipitation Model Is Incorporated for China Second-generation typhoon precipitation model introduced in 2007 – Accounted for different morphological types (circular comma) – Accounted for terrain / coastal / weather / climate effect 2000 2007 2010 First-generation typhoon Third-generation typhoon precipitation precipitation model model introduced in 2010 introduced in NWP Model in – Improved transition between 2000 morphological types – Circular precipitation shield – Improved extratropical transition – No accounting for coastal / terrain – Improved coastal / terrain / weather / climate effects enhancements – Improvements based on the availability of additional data CONFIDENTIAL ©2014 AIR WORLDWIDE 15 Typhoon Bilis (2006) Had Lower Wind Speeds, and Still Generated Significant Precipitation and Losses • Bilis made landfall with winds of only 70 mph, but generated in excess of 600 mm of total precipitation • After landfall, Bilis turned southwest and affected 6 provinces over a period of 5 days • Bilis’ wind speeds were half those of Saomai, but the storm generated twice the amount of economic loss CONFIDENTIAL ©2014 AIR WORLDWIDE 16 Validation of Typhoon Precipitation Risk Distribution Return Period Precip - Shanghai 800 50 Year Return Period Precipitation (mm) Modelmodel Historicalhistorical 600 400 Precip Amount Precip 200 Shanghai 0 50% 4% 2% 1% 0.40% Exceedance Probabilities Return Period Precip - Guangzhou 800 Modelmodel Historicalhistorical 600 400 Guangzhou Precip Amount Precip 200 0 50% 4% 2% 1% 0.40% Exceedance Probabilities CONFIDENTIAL ©2014 AIR WORLDWIDE 17 Vulnerability Module CONFIDENTIAL ©2014 AIR WORLDWIDE 18 Salient Features of AIR’s Vulnerability Functions - Separate vulnerability functions are developed for wind and flood - Vulnerability assessment is based upon building attributes: – Occupancy: single-family, apartment, commercial, industrial, and CAR / EAR – Construction: masonry, steel, and reinforced concrete, etc… – Height: low (1 to 3 stories), medium (4 to 7), and high (8+) - Separate vulnerability functions are developed for building, contents, and time element coverages - Vulnerability functions account for duration of wind and rainfall - Other factors include building type, construction practice, construction material, and workmanship in the region CONFIDENTIAL ©2014 AIR WORLDWIDE 19 Variation in Vulnerability by Line of Business Can Differ Greatly Single-Family Apartment Commercial Non-Engineered Structure Marginally Engineered Structure Engineered Structure • Poor workmanship in • Reasonably good • Well-designed roof and wall construction of roof and wall construction of roof and wall building elements • Weak foundation • Good foundation • Solid elevated foundation CONFIDENTIAL ©2014 AIR WORLDWIDE 20 Variation in Vulnerability by Construction Can Vary Based on Location Masonry Steel Reinforced Concrete 1.0 0.6 0.5 • Weak connections between • Strong frame structure • Strong frame structure building elements • Surface corrosion, rust- • Cracking and rebar • Pervious induced expansion expansion CONFIDENTIAL ©2014 AIR WORLDWIDE 21 Variation in Vulnerability by Height Is an Important Factor High-rise (8+ stories) Mid-rise (4 to 7 stories) Low-rise (1 to 3 stories) • Marginally engineered structure • Engineered structure • Engineered structure • Highest damage ratio • Medium damage ratio • Lowest damage ratio CONFIDENTIAL ©2014 AIR WORLDWIDE 22 The AIR China Typhoon Model Supports the CAR / EAR Line of Business • Time-dependent replacement cost • Time-dependent vulnerability R(t) V(t) t Vulnerability t Replacement Value Replacement Timeline Timeline CONFIDENTIAL ©2014 AIR WORLDWIDE 23 AIR Conducted a Damage Survey for Typhoon Saomai CONFIDENTIAL ©2014 AIR WORLDWIDE 24 Modeled Loss Curves CONFIDENTIAL ©2014 AIR WORLDWIDE 25 Benchmarking of Historical Typhoon Losses on the Industry Loss Exceedance Distribution for China CHINA Wanda ’56 Rananim ’04 Winnie ’97 Insured Loss Loss Insured AAL 10% 4% 2% 1% 0.4% 0.2% Exceedance Probability CONFIDENTIAL ©2014 AIR WORLDWIDE 26 AIR China Typhoon Model Can Output Wind-Only and Flood-Only Loss in Touchstone TOT Shanghai TOT CHINA WND WND FLD FLD AAL 2 5 10 25 50 100 250 500 1000 AAL 2 5 10 25 50 100 250 500 1000 TOT WND Zhejiang FLD TOT Hubei WND FLD AAL 2 5 10 25 50 100 250 500 1000 AAL 2 5 10 25 50 100 250 500 1000 TOT Fujian TOT WND Yunnan FLD WND FLD AAL 2 5 10 25 50 100 250 500 1000 AAL 2 5 10 25 50 100 250 500 1000 CONFIDENTIAL ©2014 AIR WORLDWIDE 27 AIR China Typhoon Model Can Output Wind-Only and Flood-Only Loss In Touchstone TOT Shanghai TOT CHINA WND WND FLD FLD AAL 2 5 10 25 50 100 250 500 1000 AAL 2 5 10 25 50 100 250 500 1000 TOT WND Zhejiang FLD TOT Hubei WND FLD AAL 2 5 10 25 50 100 250 500 1000 AAL 2 5 10 25 50 100 250 500 1000 TOT Fujian TOT WND FLD WND FLD AAL 2 5 10 25 50 100 250 500 1000 AAL 2 5 10 25 50 100 250 500 1000 CONFIDENTIAL ©2014 AIR WORLDWIDE 28 Next Steps for the AIR China Typhoon Model - Update industry exposure database - Improve flood model - Add storm surge - Support different unknown damage functions by province CONFIDENTIAL ©2014 AIR WORLDWIDE 29 Title CONFIDENTIAL ©2014 AIR WORLDWIDE 30 .
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